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Financial Moves to Make in Your 20s

Mar 31, 2021 3 min read Ilana Polyak

As a marketing major, Andy Sherman expected he’d land a creative role, and he still hopes to find work in an advertising agency—someday.

But three years after completing his degree from Winona State in Minnesota, Sherman has more-pressing needs: a steady paycheck and health insurance. That’s because he has $50,000 in student loans and a $3,500 credit card balance. The temporary contract positions he’s had in marketing and advertising up to this point haven’t helped him get on steady financial footing, and he’s ready to start “adulting.”



“I think I should be farther along,” the 29-year old says. “But for some reason or another, things don’t seem to be working out for me.”

Next month, Sherman, who lives in Minneapolis, will start a new job as a full-time loan officer at a financial institution. Though the job isn’t in his chosen field, he hopes it will bring him much-needed financial stability.

“It’s permanent, it pays more and has benefits,” Sherman says.

The way many financial experts tell it, the third decade of life is the time to lay a solid financial foundation. It’s the time to adopt good financial habits so they become ingrained.

It’s also the time when saving can be the most powerful, because money in the bank or invested in stocks and bonds can compound many times over, throughout the decades.

But that can be a tall order for recent grads like Sherman. It’s hard to imagine saving for retirement, or even shorter-term goals such as a down payment on a house, when income is unstable and debt is crushing.

As a result, retirement “isn’t something I even think about,” Sherman says. His retirement savings come to less than $2,000.

Not surprisingly, only one quarter (26%) of Americans age 26 to 35 are “financially healthy”—spending, saving, borrowing and planning in a way that will allow them to be resilient and pursue opportunities over time, according to a study from the Financial Health Network.1

Given that reality, three important financial undertakings should be on every twentysomething’s mind:


  1. 1. Start traveling your career path

    For all the grief millennials (and their trailing cohort, zoomers, a.k.a. Gen Z) get about growing up entitled, there’s no denying they're in a tough spot. More than two-thirds of 2019 college graduates had student loans—and an average debt load of nearly $30,000.2

    At the same time, the economy has shifted to one where higher education is a must for anyone hoping for financial stability. Over a lifetime, people with a bachelor’s degree Opens in a new window out-earn those with high school diplomas by $1 million—and a master’s degree boosts that difference by 40%.

    That means twentysomethings must plot their career paths carefully, sometimes making tough choices. Sherman, for example, would like to continue exploring a creative position in advertising and marketing, but he recognizes that his future depends on economic stability in the present. “I’m trying to be realistic about the kinds of jobs I can get,” he says.


  2. 2. Learn to budget

    A simple way to budget is with the ‘50/30/20’ rule:

    • Needs: No more than 50% of spending should go toward fixed expenses such as housing, insurance and food.
    • Wants: Only 20% of spending should be allocated toward nice-to-haves, which include eating out, vacations and even gas for your car, if it’s used for traveling other than necessary commuting.
    • Future: The last 30% of spending can be directed toward financial goals, such as retirement savings, building emergency funds and paying off debt.


  3. While there may be little wiggle room in some spending categories (like student loans), there may be more flexibility elsewhere. For example, living with roommates until finances stabilize can make good financial sense. Opting for less-expensive health insurance options—either through an employer or on state health care exchanges—may help lower costs.


  4. 3. Save for a rainy day

    While it’s important to start making inroads on retirement savings, it can be even more crucial to protect against financial hardship with emergency savings. A cash cushion can soften the blow of a job loss or a major expense. Cash reserves of at least three to six months' living expenses can help twentysomethings ride out most situations.

  5. Even so, how much savings are necessary depend on individual circumstances. People who have their own businesses (including contractors) and those with uneven income, such as salespeople who work on commission, need a bigger emergency fund—especially in a pandemic that’s upended service industries.


What you can do next

Twentysomethings are juggling a lot. They have record amounts of debt and may not yet have settled down into lucrative careers. Nonetheless, making even small moves now, including learning how to budget properly, can have a big impact on your financial health later.


  • 1 “U.S. Financial Health Pulse 2020 Trends Report, ” Financial Health Network, August 2020 (finhealthnetwork.org/research/u-s-financial-health-pulse-2020-trends-report/)
  • 2 “A Look at the Shocking Student Loan Debt Statistics for 2021,” StudentLoanHero.com, updated Jan. 27, 2021 (studentloanhero.com/student-loan-debt-statistics/)


Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com, where she is a frequent contributor.


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